Thursday, August 08, 2013

As the dispute between Time
Warner Cable and CBS drags on, obviously there is some pain being experienced
by TWC's consumers as they are deprived of access to CBS content.This "pain" is
exacerbated by CBS's decision to block access by all Time Warner Cable
broadband customers to the video programming available on CBS's Internet site.
In a novel twist, this Internet blocking even affects TWC's broadband customers
who do not subscribe to TWC's cable programming.I am not a supporter of the
FCC's net neutrality rules. In any event, by their own terms these regulations
don't apply to blocking actions by Internet content providers such as CBS, only
to the broadband Internet providers. Do not misunderstand. I am not suggesting
any regulatory remedy here for CBS's blocking action. Aside from anything else,
I believe that CBS – just like the broadband providers themselves – has a First
Amendment right to grant or not grant access to its content. Nevertheless, if
nothing else, CBS's action does illustrate the radical transformation the
communications marketplace has undergone since Congress adopted the "must
carry-retransmission regime" in the Cable Television Act of 1992.Indeed, such a radical transformation
that the Internet, as we know it today, was just a gleam in Al Gore's eye in
1992, along with a few other far-sighted technologically-savvy cognoscenti. Of course, today, as the
FCC itself just recognized in its Fifteenth
Video Competition Report, online ("over-the-top") Internet video
is becoming increasingly prevalent, and, hence, an increasingly potent source
of competition across the video marketplace. For lots of facts and figures
concerning competition in the video marketplace, see the blog, "FCC
Report Reconfirms the Reality of Video Market's Competitiveness," by
Seth Cooper, my FSF colleague.I can actually remember much
of the debate surrounding adoption of the 1992 Cable Act. As anyone else who
was around then knows, or who simply researches the legislative history, the
principal justification for the must carry-retransmission regime (the two were
linked together) was the presumed need at the time to protect local
broadcasters and the local broadcast signal. Indeed, even a cursory reading of
the Supreme Court's 5-4 decision in Turner Broadcasting
System v. FCC will show that, but for the Court's acceptance of the
argument that Congress intended to protect the signals of local broadcast
stations from what the Court then called cable's "bottleneck" power,
the must carry regime would have been declared inconsistent with Turner's First
Amendment rights.With the principal justification
for the must carry-retransmission regime the protection of the viability of
local broadcast stations, it is somewhat odd that the current TWC-CBS
"retrans" battle, along with other present-day similar ones,
reportedly turns on disputes regarding the terms of carriage of non-local
broadcast station programming, such as various cable TV networks, along with
increasingly important digital distribution rights. I submit that the
negotiations going on now could not have been imagined by the framers of the
1992 Cable Act.My point here – and I have
been consistent on this point throughout – is not to argue in favor of some regulatory "fix" or the other
that tweaks the current regime to favor one party or the other. At the outset I
spoke of the (hopefully) short-term "pain" being experienced by
current TWC subscribers deprived of their CBS programming. But hopefully out of
this experience, and similar "retrans" fights, there will be a
long-term "gain" for consumers. This gain would come in the form of a
realization that, in today's digital broadband Internet environment, with a
competitive video marketplace, it is time to get rid of all the decades-old legacy
video regulations that were put in place in an analog era when consumer choice
was limited in a way not imaginable today.Deregulation of the video
marketplace, along the lines of the DeMint-Scalise "Next Generation
Television Marketplace Act" introduced in the last Congress, is the
ultimate solution to ensuring that consumer welfare is enhanced by negotiations
between programming suppliers and program distributors in a truly free
marketplace. With all the legacy regulatory backstops in place, what we're
witnessing now is not what I'd call a free market negotiation.For further reading on this
point, see my July 25 blog immediately below, with still more links embedded
therein for even further readings.

Today I have been reading
bits and pieces about the "retrans dispute" between CBS and Time
Warner Cable. These retransmission disputes have a way of turning nasty and
leaving pay TV viewers -- such as Time Warner Cable's subscribers in this
instance -- in the dark.

And by "in the dark" I mean the pay TV subscribers are threatened
with the loss of programming on their local TV station, or actually lose it,
and they generally are in the dark as to what's behind the dispute.
Here's a good post on the Madery Ridge website
that is useful in explaining what's behind the dispute. I don't mean to endorse
every assertion and interpretation contained in the post, but it does shed
light on the problematic nature of CBS's claims -- and the claims that are
often made by the broadcast television networks in these retransmission
disputes.

Even in the face of sharply rising retransmission fees paid to broadcasters by
pay TV providers, I certainly don't want to presume to judge what the right
"negotiated" price should be to resolve the TWC - CBS dispute -- in
other words, how much TWC must pay to continue to carry CBS's broadcast
programming. But, as I have said many times in the context of discussing similar
retransmission disputes, please don't assume that what is taking place in LA is
a "free market" negotiation as the broadcasters often claim. The
broadcasters retain many legacy regulatory privileges -- adopted decades ago in
a much different video marketplace environment -- that provide an overlay to
the negotiations. These legacy regulations prevent the bargaining from being
characterized as truly free market. That's why "negotiated" above is
placed in quotes.

And the fact that broadcasters have obtained their spectrum for free is no
small matter. In fact, it's a big deal in a world in which only 10% of American
households still obtain their television programming free
"over-the-air."

Along with other FSF scholars, I have written several pieces explaining why the
"retrans negotiations" are not truly free market negotiations. If you
need a refresher on this important point as you try to figure out the current
TWC - CBS brouhaha, see here, here, and here.